Hey Jody,
I've shot about 550 rounds of Remmington Thunderbolt (Round Nose lubricated, 40gr, Hi-Power) and Brass-Jacketed Hollow Point (Golden Bullet, 36gr) my Walther P22 (5" barrel, not the 3") with what I would consider reasonable accuracy. At 25 yrds, my shot groups, at a rate of 2 rds per sec., were about 2" in diameter. I only had a few jams (mostly from not holding the pistol at a slight up angle).
I could see how a 3" barrel kit might induce the inaccuracy you experienced but I have found that, even at a 3 rds/sec firing rate, I shoot nice in tight groups against a human target.
I hold no illusions about its value as a match gun. Ha! I'd take my S&W 78G .22cal Air Pistol for matches. I don't care if it takes me a few mintues to complete the course. But for hosing paper and other targets with copieous amounts of lead for an hour or two, I have found no other .22 that gave me as much fun.
I have an uncle who owns a Ruger (don't ask what model... I don't know) that is far more accurate. However, its balance is off to me, it's heavier yet manages to kick more with the same box of ammunition (I suppose its light bolt is to blame), and its grip is, to say it nicely, uncomfortable to my hand. My S&W air pistol has grips and a weighs two pounds yet manages to be more comfortable. I suppose that's just preference. I found that, switching from my Walther to a Beretta 9mm to a Ranger Lite .45, one right after the other on the range, my accuracy suffered not in the least.
I've even packed the gun's clip with alternating round nose lead and brass jacketed HP and suffered no real difficulty in accuracy. Ofcourse, I drop my standards here since this set up is my self-defense load out. Trust me, there'll be no one shot-one kill crap. That's what my .308 rifle is for. If I'm using the Walther, they're getting all ten rounds to the chest. It's accuracy is good enough for that.